rpassive fund before fees = restock index reactive fund before fees = 1.80% +1.1 = 6%...
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rpassive fund before fees = restock index reactive fund before fees = 1.80% +1.1 = 6% + Ut stock in index + & where the error terms u and are independent over time and of each other, have zero means E(u+) = E(+) = 0, and volatilities of var(u) = 15% and (var(+) = 4%. The hedge fund uses the same strategy as the active mutual fund, but implements the strategy as a long-short hedge fund, applying 4 times leverage, generating the following return before fees: hedge fund before fees - 4 * (reactive fund before fees - stock index) Question 4 What is the hedge fund's alpha before fees? O a. 7.2% O b. 4% c. 2.4% d. 0% O e. 9.6% f. 1.8% rpassive fund before fees = restock index reactive fund before fees = 1.80% +1.1 = 6% + Ut stock in index + & where the error terms u and are independent over time and of each other, have zero means E(u+) = E(+) = 0, and volatilities of var(u) = 15% and (var(+) = 4%. The hedge fund uses the same strategy as the active mutual fund, but implements the strategy as a long-short hedge fund, applying 4 times leverage, generating the following return before fees: hedge fund before fees - 4 * (reactive fund before fees - stock index) Question 4 What is the hedge fund's alpha before fees? O a. 7.2% O b. 4% c. 2.4% d. 0% O e. 9.6% f. 1.8%
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